A massive supply crunch is to spill over into the holiday season
Port delays are leading to a massive supply crunch that is threatening to spill over into the holiday season.
At the US largest port – the Port of Los Angeles the times to process shipments are now extending to 3 weeks. There are so many layers to this story, but let’s try to figure out:
What Are the Biggest Pain Points Causing the Supply Chain Issues Right Now?
Well.. we’re buying so much product, and, combined with the work that we did in the summer for back to school and fall fashion, the importers in the United States pulled inventory forward, as they saw lead times being extended. And, although Asia factory output is at record highs, they’re still behind on orders there as well. So we started to see traditional peak season cargo moving our way in June, as opposed to normal times when we saw that in August and September.
The backlog there looks pretty serious – from reports we’re seeing, truck drivers have to wait a long time, and it seems like the backlog is more kind of an off-loading process and they don’t get paid for that, so clearly not happy with that backlog.
But what about maybe federal assistance or other kind of help to fix the issue, as it’s grown? 3 pieces to that:
1. Vessel Productivity
Vessel productivity by the long shore members of the ILWU is up 80% in the last month, compared to presearch times. And, since the surge began last summer, we’re up 50% investment productivity, with each ship that comes into the Port of Los Angeles loading and unloading more than 11300 containers which is the best in the world.
2. Truck Turn Times
Truck turn times, although higher than we would like right now, are not that far off what they look like during peak seasons in the recent past. But here is the key statistic:
30% of the truck appointments go unused every day for a variety of reasons,
and that has to change.
3. Open Transportation Capacity Utilization
There is skilled labor on deck, open truck drivers around the roads – we have to take advantage of that open capacity.
And how do you do that?
For example, a program was started with the help of port envoy and others in the federal government, called “Accelerate Cargo LA”, where a “cargo push system” was created. The system knows how much cargo is on the docks by each of the importers, telling them exactly where and when that cargo can be picked up, and getting commitments from those importers and their partner truckers. This basically will move cargo much quicker than just simply opening up the terminals and waiting for appointments to be made.
Moving to a 24/7 Operation
There’s also been talk of moving to a 24/7 operation. But is that really the solution to cut down some of the wait times, in addition to those tracking appointments we just talked about? And are there the workers in place to start the transition in that direction?
The US ports terminals are already working extended hours. In the LA harbor area, Saturday night, around 10 pm, 6 of our 7 terminals were actively working. And that’s not a time in normal days that you would see that much activity.
Realistically speaking, before we started adding more costs to the supply chain, and pushing inflationary thoughts, we need to take advantage of that latent capacity I just mentioned.
The dock workers have been averaging 6 days of work per week, every week, since the pandemic began in March of 2020.
1000 Long Shores Were Added to the Us Ports Industry
About a 1000 long shores were added to the industry. The employer’s association continues to work with the labor leadership at the IOWU to maximize every job opportunity. But there are 2 other segments that we have to look at as well:
- Tn the truck driver’s side – there are 18000 drivers registered to do business at the ports; only half It’s all here at least once a week
- And on the warehousing side, which traditionally works a day shift only – we’ve got to match up hours of operation and get more folks on the job in that setting.
Just a COVID Supply Backlogs or a Lack of Infrastructure Investment
Is this an issue of just a covid supply backlogs and what we’ve seen in the pandemic, or maybe also a factor in a lack of investment going into the infrastructure, obviously coming at an interesting time. We’re waiting to see what progress has been made in DC on that front; how important is it to fix the issue, prevent it from happening again and move forward?
Over the last decade the federal government and US Congress has out-invested the West Coast ports at a rate of 11 to 1. That’s 11 billion dollars that’s gone to port infrastructure on the East and Gulf Coast, compared to a little more than a billion dollars on the West Coast. And this conversation is so timely because hopefully tomorrow Congress takes up the vote on the infrastructure bill as well as reconciliation.
Holidays Season Shopping
And, finally, there’s a lot of people watching this saying: “well… What does this all mean for me, as a consumer?”. We talked previously about potential delays going into the holiday season. What’s going to be the impact down-the-line for those who are thinking: “am I gonna be able to get the things I want during the holiday season?”.
The answer to that is – yes.
Because the import community saw this, and the extended lead times, they began to bring holiday season inventory starting back in June, as I mentioned. So we will have Christmas on December 25th and other year end holidays as scheduled. But maybe shop a little earlier, go online, see if your favorite products are available. If not, set that timing up. But we’ll be able to find plenty of gifts for family and friends, it may just take a little extra work and time to get prepared.
Yeah, it’s hard to believe we’re getting that warning in September to start your holiday shopping, right?
